Question: In January, May futures for sugar (world) trades for 7 cents per pound, while sugar (domestic) trades for 22 cents per pound. You consult technical charts and conclude that their spread is going to widen to 20 cents per pound.
a. Suggest a trading strategy for exploiting such opportunities.
b. If the spread indeed widens as predicted, what is your trading profit if you trade seven contracts of each type, with 112,000 pounds in each contract?